Income statement
An income statement shows a business's profits and losses
An income statement (The surplus remaining after all costs have been deducted statement) statement shows the profit or loss made by a company over a set period of time.
Income statements show both the The difference between sales revenue and the cost of making the product sold. and the This profit is calculated by deducting all expenses away from gross profit. made by a company.
There are many reasons why a company would produce an income statement:
- to calculate the total costs of expenses
- to calculate the profit/loss made for the year
- legal reasons (all limited companies are required to produce an income statement)
- tax reasons (profit needs to be calculated so businesses can accurately calculate their tax payments)
- to calculate cost of sales
- to compare with previous years or other companies